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Why TOPS Gains Over 1000 Percent This Week.
Feb. 4, 2018 6:01 PM ET|Includes: DRYS, DSX, TOP Ships Inc. (TOPS)
NASDAQ ticker: TOPS is a Greek shipping company with a very dramatic past and a very dramatic future.
If you look at the charts, you will see an historic bloodbath of epic proportions for shareholders over the last three years. That is no exaggeration. Losses are so high they are mind boggling and the numbers so great that they are difficult to calculate and harder to believe once you crunch them through all the reverse splits to see what happened.
Over the course of a few years of devastating troubles for all shippers and particularly difficult times for Greek Shipping, no one bothers to pay attention to what is actually happening and everyone just “knows” that this is a perpetual Greek shareholder bilking scam. Of course, that “knowledge” is about to get a lot of people who didn’t think this through into a whole lot of trouble.
History:
TOPS is not a new company but they have had enough secondary issues that you have to treat the current paradigm as though it is an initial public offering. The company has been completely rebuilt. When the global economy began to recover, Greece didn’t come along with it. Neither did the shipping sector. Greece had its own problems and shipping had way too much capacity and not enough transport charters for any of them to operate at a profit. All shippers suffered and the Greek shippers suffered the most.
During the last two years, a recovery has been underway and Shippers have been restructuring since they had no choice if they wanted to stay operating. Ship scrapping has increased and new builds decreased and TOPS pared their fleet to only profitable vessels. They ate huge losses to do it. More correctly, the shareholders took huge losses to do this.
The way they went about recovering was pretty uniform and you see the pattern with all of them. It required a series of reverse splits to raise share prices and then secondary offerings to raise more funds (which drops the share price from dilution pressure). If necessary, the process was repeated multiple times. DRYS and DCIX are roadmaps that we see from this year and are a look into where TOPS is going.
The BEAR CASE:
The Bear Case is simple: They are selling fear that TOPS isn’t even in business to do shipping, but are in business to bilk shareholders. They focus on reverse splits, secondary issues and references to a “Greek ATM”.
Follow the money, though, and it doesn’t disappear in Greek shipping books. It disappears in Bear Hedge funds as the massive (and illegal) naked short campaign along with all the terrifying propaganda they could dream up. Naked shorts levy so much selling pressure against a stock that they can bankrupt a company for no good reason at all. If they succeed, it is the big prize and the people with short positions NEVER have to pay a cent to cover. They get to eat the entire market cap of the company they destroyed.
If a company is fraudulent, they deserve to get bankrupted. But Bears don’t care about whether aa company deserves it or not. They care about whether the plan can work and if there is enough negative propaganda to be generated, they have a target. And they get filthy rich doing this. The problem for them is that when they pick on a company that ISN’T going bankrupt and they short with a false narrative and that narrative gets debunked, there is an enormous and swift correction that can wipe out not only their entire investment but many times what they invested.
So bears will be very very very aggressive until the very end of capitulation.
The Bull Case.
The Bull case is that the company has exited the troubled waters, just like the rest have. They have a solid plan of action, 14 vessels, more coming, full contracts for the upcoming year, cash visibility through 2021, an early earnings report that (not surprisingly) shows almost doubling of shareholder assets while only accumulating slightly more debt. Their model is working.
Instead of stealing money, they have been investing in new vessels and have gotten contracts for them IN ADVANCE.
Share prices have dropped steadily since last February as reverse splits and dilution fueled rumors of “death spiral financing”, Crooked greek thugs robbing shareholders, owners treating the market cap like a personal ATM and other such rubbish that sounde scary enough to keep investors off. That and the constant naked short pressure that made this one of the top 10 most shorted stocks on NASDAQ in 2017 Crashed shareholder value with losses of over 99 percent within a year on paper.
ALL FOR THE WRONG REASONS AND FOR A FALSE NARRATIVE.
Market cap is over 10x lower than it should be by any fair valuation and the only thing Bears have going for them right now is that people have a hard time believing a stock could possibly go up as much as it is going to. It went down a lot more than that and this is just a correction and one that is really warranted.
CURRENT SITUATION:
November the oversold condition became apparent and a spike ensued over 3.50. At that point, TOPS issued a new secondary offering and explained it was for acquisitions. Bears claimed it was theft and the shorting started as Crede bought and sold into the market per agreement. Share price plummeted from the selling pressure despite the fact that the value of the assets were increasing while market cap was getting crushed.
The new share issues created enough selling pressure to give bears cover to short this stock to their hearts’ content. They drove it way, way, way below fair market value.
To make it more interesting for shareholders, TOPS announced an end to the offering. Along with another JUST LIKE IT. That set bulls up for another long run of short pressure if they held.
DILUTION IS EITHER OVER OR NEARLY SO. The 6K Friday after market was a revelation to the market but not to bulls that have been paying attention. They have been buying vessels, not stealing money and right now vessels are worth MORE than money. Shipping is profitable and they are in a great niche position.
Market cap will be re-inflated with the announcement of dilution ending and the 6K Friday tells us that is already a done deal waiting to happen. Everyone knows this and the best bears can hope for at this moment is that they can escape with their skin and a cover price that won’t bankrupt them. They will say anything right not to slow down the squeeze that is coming.
However it goes, share prices should return to a position over 4.00 short term and over 8.00 within six months as long as we don’t have a new catalyst that Bears can spin into believable propaganda. If that happens, you have to sell and go short because we have seen over and over and over again that you cannot go against the bears during secondary issues. Smart bears would have already become bulls now.
Understand what moves this and the catalysts are easy to see. This is time to buy and potential gains are as insane as the actual losses have been. The ledger will balance.
Dig in and do your research. Next week will see huge volume and huge gains.
Incredible, actually. But not incredible if you look at what really happened and crunch the numbers. Fear isn’t rational and the fear should be wiped out by looking at the market and the earnings and the charts for this stock.
We should easy see $10-$100 within a year!
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